Dead capital keeps native reserves poor

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Several years ago, I was asked by a journalist to explain why people in Third World countries were poor while we were rich. She had never heard any other explanation than the Marxist claim that those poor nations were being exploited and deprived of their wealth by evil and greedy multinationals.

I told her about the ground-breaking research done by famed Peruvian economist Hernando de Soto. He showed convincingly how their own governments systematically prevented the populace from accumulating capital and creating wealth.

When it takes months of paperwork and it costs a small fortune in bribes to simply register a small business, when everything you possess can be taken away because property rights are not recognized or enforced, it's awfully difficult for entrepreneurship to flourish. De Soto estimated there exists at least $9.3 trillion US in what's termed "dead capital," untitled assets held by the world's poor.

I was reminded of this when I read the news about the sorry fate of the native residents of Attawapiskat in Northern Ontario. These people live in awful conditions reminiscent of those in Third World shanty towns. They have little control over their immediate environment and because of this, little incentive to feel responsible about it.

Ottawa certainly sends money, huge amounts of it actually, on a per capita basis. But instead of being invested, this capital is consumed or diminished through waste and corruption, as arguably is a large part of foreign aid.

And just as in Third World countries, First Nations people who live on reserves have no or insecure property rights on their land. The partial rights of individual ownership that do exist cannot be fully exploited. The land is owned by the federal Crown, which has been managing reserves for over a century on the basis of the paternalistic Indian Act.

How can this situation be reversed? There are Canadians who have come to the same conclusions as de Soto.

"The Indian Act reserve system substantially reduces land value and promotes low value land use. It prevents us from accessing the equity in our lands, raises our costs of doing business and discourages investment," says former chief Manny Jules, who now works to advance the First Nations Property Ownership Initiative.

Jules collaborated on a recent essay, Beyond the Indian Act: Restoring Aboriginal Property Rights, with well-known University of Calgary political scientist Tom Flanagan, André Le Dressay and Christopher Alcantara.

They argue that Ottawa should transfer titles to the land to Indian bands, which could then create real ownership rights for their citizens. The integrity of the land base would be protected, while new opportunities would open up for individuals to improve, buy, exchange, borrow against, and generally profit from real land ownership.

I fully realize that this would not instantly solve all the problems face by Canada's First Nations. But it would be a significant first step to help natives living on reserves take economic control of their lives. And I am glad to see this week that Conservative MPs have advanced this concept in a pre-budget submission.

If China and India have managed to get out of sordid poverty and to grow quickly after adopting capitalist reforms over the past decades, it's certainly not unrealistic to expect the same in our own backyard. Ottawa needs to listen to Flanagan & company and give to native people the same property rights enjoyed by all other Canadians.

Michel Kelly-Gagnon is President and CEO of the Montreal Economic Institute.
*This column appears in Sun Media newspapers, published both in several of Canada's key urban markets (Toronto, Ottawa, Calgary, Edmonton, Winnipeg and London) and in its 28 community dailies.